Article
Are You REALLY Ready for That Customs Audit? Read This First!
Are You REALLY Ready for That Customs Audit? Read This First! Did you know that if you find an error in your customs declarations and
9 October 2026
Did you know that if you find an error in your customs declarations and tell HMRC about it in writing before a customs audit, and before you have any reason to think HMRC is looking into your customs affairs, Notice 301 says it won’t charge a penalty? Make the same disclosure the week after a compliance check letter has arrived and that protection is no longer available. The duty owed is exactly the same in both cases, but once a customs audit is under way HMRC can consider a penalty.
Much of what decides a customs audit is settled long before HMRC writes to you. This article looks at some parts of a check that are easy to overlook, and the questions worth asking yourself now.
Once your goods have cleared, HMRC can ask for your accounts, bank records, contracts, product specifications and import and export paperwork. It can visit your premises, normally by appointment although it doesn’t have to give notice, and it can compare what you declared with your suppliers’ and customers’ records. HMRC also says its officers won’t usually have time to look at all your records, so a check with no findings hasn’t confirmed that your declarations were right.
HMRC already holds your declaration data, and a free HMRC service lets you download the same data yourself. It is worth looking at before HMRC does, and the course shows you what to look for in it.
Using a customs agent leaves the liability with you. Whether your agent declares in your name or in its own, HMRC can collect the duty and import VAT from you, and HMRC’s penalty guidance says relying on an agent is not a reasonable excuse where their mistake caused the error.
The bigger practical problem is paperwork. If your broker holds the invoices, payment records and transport documents behind your entries and you hold only copies of the entries, what happens if that broker stops trading before HMRC asks for them?
Customs records must be kept for four years, and VAT records for at least six. HMRC normally has three years to tell you that duty is owed, but for goods declared from 1 January 2021 that can stretch to 20 years where HMRC believes an offence was involved. Destroying customs records at four years keeps you within the rules but may leave you with nothing to show for a period HMRC can still look at.
HMRC tests each declaration against the documents behind it. Could you produce the full set for an import from three years ago, from the purchase order through to the duty paid?
Your customs value starts with the price you paid, but some costs have to be added that never appear on an FOB invoice. One is freight and insurance to the UK. The other is what HMRC calls “assists”: moulds or tooling you supply to the manufacturer free or at a reduced price belong in the customs value. If your broker works only from the supplier’s invoice, these costs won’t be added unless you tell them about them.
Take an importer of plastic housings from Vietnam, invoiced FOB at £8 each for 5,000 housings a month, with freight and insurance billed separately by the forwarder. The importer also paid £30,000 for the injection mould tool, which sits at the factory and is expected to make 50,000 housings. The figures are illustrative and the 4% duty rate is assumed.
| Item | Amount |
|---|---|
| Invoice price, FOB | £40,000 |
| Sea freight, billed separately | £3,100 |
| Cargo insurance, billed separately | £300 |
| Share of the mould tool (£0.60 per housing × 5,000) | £3,000 |
| Correct customs value | £46,400 |
| Value declared | £40,000 |
| Undeclared value | £6,400 |
| Duty underpaid at 4% | £256 |
Across 36 monthly entries that is £9,216 of duty and, on these simplified figures, £47,923.20 of import VAT. If you use postponed VAT accounting the VAT goes through your VAT return, but the error still sits on 36 declarations, and Notice 301 adds identical errors together when deciding whether the £10,000 threshold for a serious error has been passed.
The same importer pays a fee on each order to an agent in Vietnam. Whether that belongs in the customs value depends on who the agent works for, and the course covers how to decide.
If you claim 0% duty on EU goods using “importer’s knowledge”, meaning your own evidence that the goods qualify, it is entirely down to you to prove it if HMRC checks. A supplier’s email saying the goods are made in Italy shows where they were made, but it doesn’t show whether they meet the origin rule needed for 0% duty.
On exports, an invoice template that prints a statement on origin on every EU sale can’t tell which products meet their origin rule. If EU customs check the statement and you can’t back it up, your EU customer becomes liable for the full duty.
Our Preparing for a Customs Audit course covers what HMRC checks and how to test your own records against it. You will cover how a compliance check works and who is liable when an agent files your declarations, how to build an audit trail and how long to keep records, and how to check import declarations for classification, valuation, duty and import VAT errors.
The course also covers the evidence behind preference claims and statements on origin, the proof of export you need for VAT zero-rating, running a special procedure within its conditions, and what happens when HMRC finds an error, including when to disclose it.
Exports carry their own risk, and it is VAT rather than duty. You can only zero-rate a sale if you hold evidence of export, normally within three months of the sale, and you must keep that evidence for six years. If it isn’t on file by the deadline, VAT is due on the sale.
Ex works sales carry the obvious risk, because your customer’s forwarder makes the export declaration and you may never see the paperwork. Three ex works sales worth £96,000 with only invoices and orders on file after three months leave £19,200 of VAT to account for on sales priced without it. The course covers what HMRC accepts as evidence and how to make sure you get it.
If you hold a special procedure authorisation such as Inward Processing, HMRC will check that you are keeping to its conditions and that your Bill of Discharge accounts for every item imported under the procedure.
Imagine 1,000 circuit boards imported under Inward Processing, of which 850 leave the UK inside finished control units. The rest are a mix of boards built into units sold to UK customers, rejects scrapped without the right paperwork, and a handful nobody can find, yet the Bill of Discharge says every item has been accounted for. The duty involved may be small, but failing to keep to the conditions of an authorisation can lead to a penalty without a warning letter first, and HMRC can change or withdraw the authorisation instead.
If someone else keeps these records for you, you remain responsible as the authorisation holder for any error that leaves duty owing.
The obvious cost is the duty and import VAT that should have been paid, collected on a demand that covers every affected declaration, with interest on top. There can be further consequences as well:
Knowingly giving HMRC untrue information is a different matter altogether, and can lead to a criminal investigation. Then there are the costs that never appear on a demand: the staff time spent rebuilding records, and the difficult conversation with customers left paying duty on statements you can’t support.
HMRC won’t charge a penalty if you find an error yourself and disclose it voluntarily in writing, although the duty and interest are still due. Once HMRC has started making enquiries into your customs affairs, a disclosure no longer counts as voluntary, and any penalty then depends on how serious HMRC judges the errors to be. If you want the protection that comes with a voluntary disclosure, the review of your own declarations needs to happen before a check starts.
Each point below should be answerable from your own records, without relying on your broker or forwarder.
A three-hour practical course for importers, exporters and the finance, logistics and compliance staff who support them, ending with a mock audit exercise.
The course can also be delivered privately for your team. Contact us for group or bespoke pricing.
Would You Rather Someone Checked First?
Our Compliance Healthchecks & Audit service is a review of your customs documentation, records and processes by one of our specialists, before HMRC looks at them. Call 0115 727 0018 or email team@exporter-services.co.uk.
Normally three years from the date the duty became due. For goods declared from 1 January 2021, that can stretch to as much as 20 years where HMRC believes an offence was involved.
It can. A customs check can cover export declarations, export licences and preference claims, including statements on origin issued to EU customers, and HMRC also checks the evidence behind zero-rated exports for VAT.
Are You REALLY Ready for That Customs Audit? Read This First! Did you know that if you find an error in your customs declarations and
The UK-EU SPS Deal Promises Easier Trade. For Fresh Produce, the Real Question Is: Easier for Whom? By Lauren Kent, International Trade Trainer at Exporter
Whether you need immediate help with a trade issue, want to strengthen your internal processes or are looking for the right training or service, we can point you in the right direction.
